Working Paper December 2005

BEYOND GOOD I NTENTIONS FOR AFRICA’S RURAL POOR

An Agenda for Transatlantic Collaboration on Investment in
Pro-Poor Economic Growth

Michael R. Taylor

I NTRODUCTION
This paper argues for three new actions to be undertaken jointly by the United States and
Europe to help tackle the problem of chronic rural poverty in Africa. These actions would
not be panaceas and would have to be taken and understood in the context of a wide range
of other measures, both in Africa and in the international community, that are essential to
progress; but the actions proposed here would fill a resource gap that severely constrains
the ability of many African countries to move down the path of sustainable economic and
social development.

The context for the proposed actions is important, complicated, and internally conflicted. In
fact, if ever the “glass half full-glass half empty” metaphor were suitable to capture the
essence of a situation, it captures exquisitely the current state of play on the international
effort to combat rural poverty in Africa. On the one hand, the need to address the problem
is receiving unprecedented attention from the media, politicians, and opinion leaders.
Moreover, the international community of governments and experts has forged a common
vision of how poverty can be reduced in rural Africa. The vision includes building human
capacity through education and health care and a central role for agriculture-led economic
growth, which is to be fueled by a liberalized trade regime and by more – and more
effective – external financing of locally-owned development and investment plans.

For all the good intentions underlying this vision, however, and all the pronouncements and
commitments made by the United States and Europe leading up to and at this year’s G8
Summit at Gleneagles, the world’s most influential economic and political players have done
far too little to act on the vision, especially its economic growth elements.

The achievement of a liberalized trade regime – one that eliminates market-distorting

subsidies and market access barriers that hurt poor farmers – is essential to the vision but
remains very much in doubt, as the WTO agriculture negotiations and implementation of
any agreement remain severely constrained by domestic politics in the U.S. and Europe.
The best guess is that broad liberalization of agricultural trade rules at the WTO level will be
achieved incrementally, over an extended period.

_____________________________________________________________________________________

MICHAEL TAYLOR was a Transatlantic Fellow at the German Marshall Fund of the United
States in 2005, which provided support for the research underlying this paper. He is a
Senior Research Scholar at the University of Maryland School of Public Policy. The views
expressed in this paper are his own. Comments welcome at mtaylor@epi.umaryland.edu.
Of equal concern for Africa’s poor, the benefits of WTO-level trade liberalization will be
restricted largely to those farmers and countries that have the productive capacity and
market infrastructure required to compete in international markets. These prerequisites for
growth are in short supply in Africa, which only makes adequate financing of country-owned
economic development plans in that region all the more critical. Indeed, regardless of what
happens in the Doha Round of trade negotiations – at Hong Kong and beyond – investing in
the capacity of African farmers and agribusinesses to produce more, and deliver their
products efficiently to local, regional, and international markets, can help generate the food
stocks and income needed to lift rural Africans off the economic floor and spark sustainable
development.

The time has thus come for a leap forward in the level and effectiveness of U.S. and
European investment in Africa’s agriculture-led economic growth. The G8 leaders declared
at Gleneagles that this is an historic “moment of opportunity” for Africa, and they pledged to
act on it with “a renewed commitment” that includes a doubling of aid to Africa by 2010 and
implementation of the Paris Declaration on Aid Effectiveness. By taking three concrete
actions to fulfill these Gleneagles commitments, the United States and Europe can bolster
the credibility of Doha’s development aspirations, begin a much-needed transformation in
how economic development assistance is delivered, and meet the immediate need for
much-enhanced public investment in African agriculture. These actions include:

1. Formally linking public investment in agriculture with the development goals of the
Doha Round by making more and more effective external investment in Africa’s
economic growth an important goal and outcome of the negotiations.

2. Pursuing an active transatlantic partnership to make aid more effective by

implementing the Paris Declaration on Aid Effectiveness, building on the Millennium
Challenge Account in the U.S. and “The European Consensus” on development
recently recommended by the European Commission; and

3. Creating a Rural Infrastructure and Trade Facility for Africa incorporating the
advantages of resource pooling by donors and developing country ownership of
public investment priorities and decisions.

Before describing these proposed actions in more detail, it is important to say a little more
about the context for them, including the common vision for sustainable development in
Africa the actions are intended to serve, and to cite the positive shifts in polic y and
programs in the U.S. and Europe that appear to lay the foundation for real progress. This is
the “glass half full” part of the story. It is also important to further describe the gap that
exists today between intention and action – the reality that the development glass, when
viewed from the perspective of the good intentions and commitments of the United States
and Europe, remains at least half empty.

T HE DEVELOPMENT VISION AND POSITIVE SIGNS

The vision of pro-poor development on which this paper is based has evolved over at least
the past decade and is captured in a long series of documents produced under the auspices
of leading global institutions, including the United Nations, the Organization for Economic
Cooperation and Development (OECD), and the G8.1 It is also embraced in the policies
and programs of major multilateral and bilateral donors 2 and, importantly, in the poverty
reduction strategies of many African countries and institutions.3 The intellectual roots of
the now widely-shared vision can be traced to a common source, namely the writings over

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decades of Amartya Sen, the Nobel Prize winning development economist, culminating in his
1999 synthesis volume Development As Freedom.4

Sen describes development “as a process of expanding the real freedoms that people
enjoy,”5 including political, social, and economic freedom, with “freedom” understood as
people having the practical capabilities they need to lead the life they want to live. Thus, for
Sen, successful development includes freedom in the traditional political and legal sense –
“good governance” for short – but also in the sense of people having the practical capability
to acquire food, shelter, sanitation, health care, education, and other basic goods required
to lead the lives people choose to live.

Sen’s understanding of development contains two broad themes that are central to today’s
vision of development and directly relevant to the issue of how best to achieve pro-poor
development in Africa. The first is that developme nt is a complex, integrated process in
which no one element – whether good governance, access to education and health care, or
higher income – is by itself sufficient or a fair measure of success. This theme is central
both because people in fact need and seek a broad range of political, social, and economic
“freedoms” as the end of development and also because these freedoms are mutually
reinforcing as essential means for achieving development. For example, political freedom
often fosters public investme nt in health and education, which contributes to economic
growth; economic growth in turn makes possible greater enjoyment of political freedom and
further increases in social investment.

The second major theme we draw from Sen is a close corollary of the first: the development
process must spring from the initiative and effort of people in developing countries. Sen
puts the point in his own jargony but eloquent way:

In terms of the medieval distinction between “the patient” and “the agent,” this freedom-
centered understanding of economics and of the process of development is very much an
agent-oriented view. With adequate social opportunities, individuals can effect-ively shape
their own destiny and help each other. They need not be seen primarily as passive
recipients of the benefits of cunning development programs. There is indeed a strong
rationale for recognizing the positive role of free and sustainable agency – and even of
constructive impatience.6

Like many powerful ideas, this one is grounded strongly in common sense. People and
societies can be given “adequate social opportunities” by others but they have to develop
themselves. Only they know what they want, and only when they have chosen for
themselves the means to the end they desire are they likely to sustain the effort needed to
achieve it.

It is good news indeed that these two critical themes pervade current thinking on
development. International bodies, multilateral and bilateral donors, and, most importantly,
many African leaders agree conceptually on the need to address in an integrated way:

• Good governance – to establish the rule of law, combat corruption, and establish
democratic accountability of government to the people;

• Social investment – to ensure people have access to education, health care, good
sanitation and other basic social goods; and

• Economic growth – to improve the incomes of the poor so that they can acquire what
they need in the marketplace.

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Regarding economic growth, agreement is widespread also on the importance of markets
and private enterprise and, in particular, market-oriented agricultural development. African
leaders have declared that “agriculture must be the engine for overall economic growth in
Africa”7 and have called “as a matter of urgency” for much greater public investment in
agriculture and rural economic development, from both African and external sources. This
focus on agriculture is shared by the United States and Europe, as reflected in their bilateral
development strategies for Africa and mo st recently in the Gleneagles Communique, which
said the G8 countries would strengthen their support for public investment “in sustainable
agriculture, which is the most important economic sector for most Africans.”8 Importantly,
enhanced public investment in research, extension, irrigation, roads, and other market
infrastructure is justified, and essential, not for its own sake but as a means to induce and
make rewarding private initiative and investment. Public investment should be guided by
that objective.

Finally, Sen’s second theme – that the development process must be led and owned by
people in developing countries – has become today’s conventional wisdom, at least at the
surface of development discussions. In the March 2005 Paris Declaration on Aid
Effectiveness, 91 countries embraced local ownership of the development process as key to
development success and the first and most central principle of aid effectiveness.9 The
Paris Declaration was one of a series of recent international efforts to capture lessons from
experience about what works and what doesn’t work in development assistance;10 it
included also the need for donors to better align their efforts with the plans of developing
country partners (thus re-enforcing local ownership) and to harmonize efforts among
themselves to make aid more efficient and thus effective.

It is no small thing that a common vision of the development process exists, even if only on
paper. This fact reflects a conscientious effort by the international community to learn from
experience. Its practical value is that the starting point for discussion of proposed actions,
such as the three outlined in this paper, need not be debate about basic principles or goals
but rather discerning how best to implement them.

Positive Signs on Implementation

Implementation is, of course, the very tough nut to crack in Africa, far more difficult than
agreement on concepts; but, to complete the glass-half-full part of the story, there are even
positive signs regarding implementation of the development vision. In Africa, leaders have
strengthened the African Union and formed the New Partnership for Africa’s Development
(NEPAD), under AU auspices, to forge and take local responsibility for implementing
development strategies that reflect the shared development vision. This includes frank
recognition of the debilitating effects of corruption and the need to foster the rule of law and
democratic governance as foundations for development, in addition to greater investment in
health, education and growth.

Much remains to be done by African governments on all fronts, but the trend toward
democratization and decentralization of authority is real – the number of democracies has
grown from 4 to 11 over the past decade, according to Freedom House, and many others
are in transition – and investment in health and education from both internal and external
sources is on the rise in many countries. Uganda, for example, has made a commitment to
universal primary education and has sharply reduced its HIV infection rate through
pioneering public health programs. On economic growth, NEPAD has adopted a
comprehensive plan for investment in market-oriented agricultural development, and
African leaders have pledged to devote 10% of their national budgets to agriculture and
rural development.

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From the U.S. and European perspective, the most concrete positive signs regarding
implementation are a stepped up focus on democracy and governance and increased
funding of health and education programs in Africa. Governance is highlighted in the
Gleneagles Declaration as critical to Africa’s development, and donor investment in
programs to foster democracy and good governance in Africa’s poorest countries has grown
substantially. Spending by OECD countries on governance-related programs in Africa’s least
developed countries (LDCs) grew by 71% between 2000 and 2003 (the last year for which
complete data are available), reaching $1.34 billion.11 Donor investment in health,
especially prevention and treatment of HIV/AIDS has grown even more rapidly, with the
U.S. taking a leadership role through a $15 billion dollar global initiative to combat this
disease, much of which will be spent in Africa. OECD-wide, assistance to improve health in
Africa’s LDCs grew by 97% from 2000-2003, rising to $1.9 billion from $969 million.
Support for much broader access to basic education in Africa grew by 60% during this
period, from $776 million to $1.24 billion.

In addition to these positive signs of increased funding support for the governance and
social aspects of Africa’s development, the U.S. and Europe have begun to address the
central issue of African country ownership of the development process. At Gleneagles, they
affirmed that “it is up to developing countries themselves and their governments to take the
lead on development,” and some European donors are increasing the share of their
assistance funding that is channeled through locally- managed programs.12 The European
Commission, moreover, proposed in July 2005 the adoption by the EU of a common
European Union Development Policy (called “the European Consensus”), which reaffirms the
Paris Declaration principles and the need to strengthen developing country ownership by
better aligning the collective efforts of European donors with the development plans of
recipient countries.

Finally, in the United States, the Bush Administration’s Millennium Challenge Account (MCA)
is a potentially transforming new step toward local ownership of the development process
and more effective delivery of assistance. It focuses assistance on poor countries that have
taken responsibility for establishing good governance and a favorable policy climate for
economic growth, that are investing in the capacity of their own people to improve their
lives, and that have devised their own development plans with broad buy-in from local
stakeholders. Eligible countries develop and submit proposals for review and possible
funding by MCA, which is a sharp departure from USAID’s largely donor-driven approach to
assistance.13 Though it’s too early to draw conclusions based on less than a year of
implementation, the MCA’s Madagascar and Cape Verde compacts reveal its potential to
increase substantially U.S. funding of agriculture-led economic growth in Africa.

FALLING SHORT
Despite these positive signs, the U.S. and Europe are falling well short of what is needed to
fulfill their common development vision, especially regarding the level and quality of
investment in agriculture-led economic growth in Africa.

Level of Investment

The level of investment in agriculture-led economic growth remains low in relation to the
need and, OECD-wide, recent growth in such funding has lagged far behind growth in
funding for health and education and for development assistance in general. Agriculture-
related bilateral assistance for African LDCs from all OECD countries totaled about $1.8
billion in 2003, a figure that includes not only traditional assistance to improve on-farm

5
productivity but also assistance related to road transport, market infrastructure, trade policy
and other activities that help support agriculture’s role in economic growth, as well as
growth in non-agricultural sectors. For all of sub-Saharan Africa, the 2003 figure was just
over $2 billion, far short of the $25 billion in average annual funding estimated by NEPAD as
necessary to fulfill its action plan for African agriculture and in sharp contrast to the nearly
$5 billion per week that OECD countries spend to assist their own farmers.

The relatively low priority the U.S. and Europe have accorded investment in Africa’s
economic growth is revealed as well by a comparison of recent trends in funding of
development assistance in the social and economic sectors. From 2000-2003, total OECD
assistance for Africa’s LDCs (for all purposes) grew 72%, compared to 24% growth in
funding for agriculture-related assistance programs and, as noted earlier, gains of 97% for
health and 60% for education. Most of the gain in agriculture-related funding was due to a
large boost in EC funding of road transport that occurred in 2003, a good thing for all
economic sectors, but EC and OECD-wide funding to boost agricultural productivity actually
declined from 2000 to 2003.

Among individual donor countries, the funding trends are mixed but not encouraging.
France reported agriculture-related assistance to African LDCs of $90 million in 2000, which
increased to $103 million in 2003 but declined abruptly to $34 million in 2004. (France is
one of five major donor countries in Europe with 2004 data available now through the CRS.)

German funding also grew, from $70 million in 2000 to $90 million in 2003, but then
dropped to $37 million in 2004, while the United Kingdom reported funding of about $50
million in both 2003 and 2004, down from $68 million in 2000. Among the five major donor
countries in Europe that have reported their 2004 funding levels, only Belgium and Sweden
showed gains in agriculture-related assistance. All five of these major donor countries and
the EC reported gains in funding of health.

The United States reported to the CRS a gain of nearly 30% in agriculture-related funding
for Africa’s LDCs from 2000 to 2003 and a 21% gain for sub-Saharan Africa as a whole to
about $270 million. However, a separate in-depth analysis of U.S. bilateral assistance for
African agriculture, conducted by the author for the Partnership to Cut Hunger and Poverty
in Africa and drawing directly on U.S. government data sources for the period 2000-2004,
showed a gain of only about 7%, less than the rate of inflation over the period. 14
According to that same analysis, total agriculture-related assistance from the United States
to all of sub-Saharan Africa, including both bilateral and multilateral channels, increased by
about 12% from 2000 to 2004. At the same time, health spending through USAID’s Africa
Bureau alone increased by 51%, with substantially larger increases coming through the
president’s $15 billion initiative to fight HIV/AIDS and other health initiatives.

The recent increases in funding for health and other social concerns in Africa are vitally
important to the welfare of Africans and the overall development vision; and they should be
maintained. The point of the figures cited above is simply that external funding of
investment in economic growth remains low compared to the need and lags well behind
health and education as a donor priority. Without economic growth, however, any gains
being made in health and education through external assistance will remain unsustainable
by Africans themselves, and Africa’s development vision will remain unfilled.

The goal, after all, is not a successful dependency on external assistance to meet social
needs but rather the building of societies that can do for themselves. This requires vital
economies and poverty-reducing economic growth, which in turn requires public investment
that fosters private investment. The U.S. and Europe recognize this reality in their
pronouncements about African development but have not acted on it through economic
assistance commensurate with the need.

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Effectiveness

The shortfall in the U.S. and European effort may be even more serious with regard to the
quality or effectiveness of the economic assistance they deliver. As Sen teaches and as the
U.S. and Europe have recognized in their embrace of the Paris Declaration, ownership of the
development process by developing countries is essential to the effectiveness of any
external assistance. Both the OECD’s Development Assistance Committee and the World
Bank’s evaluation department have documented, however, how far we have to go to fulfill
that core principle.15

For example, the poverty reduction strategy paper (PRSP) is the central tool in use for this
purpose today – an attempt to define each country’s development strategy so that external
assistance can be marshaled and aligned around it – but PRSPs are frequently influenced
heavily by external, donor-provided consultants; fuzzy as to policy and budget priorities;
and thus often ineffective in achieving real alignment of external resources with a local
strategy that is genuinely owned locally.

OECD also reports inadequate progress in donor reliance on developing country systems to
manage donor-funded programs, with many still preferring to manage projects themselves
or through consultants or to establish separate units within government ministries dedicated
to donor projects. Such behavior is not surprising, given the accountability pressures most
development agencies are under to ensure funds are not misappropriated and to deliver
positive development results in the near term, but it is totally at odds with local ownership
and erodes local accountability for development results.

It is also inefficient. The U.S. Agency for International Development (USAID), for example,
acting largely in response to congressional mandates and accountability pressures, funnels
most of its assistance for economic development through numerous, typically small-scale
projects managed by U.S.-based contractors who operate independently of the recipient
country government. Other donors do the same thing to varying degrees. The collective
result in any one developing country can be hundreds of distinct implementing units working
on behalf of many external donors, operated by a network of outside contractors and NGOs,
each with its own overhead, management systems, and lines of accountability. This
approach dilutes and fragments development efforts.

In recent years, USAID’s annual country-level expenditure on agriculture-related assistance

in sub-Saharan Africa averaged only $6 million. By the time such modest amounts are
divided among multiple projects run by multiple U.S.-based contractors and grantees, the
amount of money able to be devoted to building sustainable new capacity and making
durable investments is small. It becomes fair to ask, when one considers both efficiency
and the undermining effect on local ownership and accountability, whether many of these
projects are doing more harm than good.

It’s harder to generalize about European development practices due to their diversity. Like
USAID, however, European aid agencies are under pressure to account for how aid is used
in settings where a history of corruption raises legitimate concerns and justifies oversight
that may conflict with the ownership principle. The multiplicity of European agencies also
contributes to the fragmentation and inefficiency of the overall assistance effort. On the
other hand, European aid agencies are not, as a general rule, subject to the same degree of
legal mandate as USAID to operate in ways that undermine developing country ownership.

In contrast to the United States, for example, European countries have made great progress
in untying their development assistance, with Belgium, France, Germany, Greece, Ireland,
Norway, Portugal, Sweden, Switzerland, and the United Kingdom having untied 90-100% of

7
their assistance commitments.16 European countries also provide much less of their
development assistance in the form of food aid, which can undercut local producers and
markets. Most EU food aid is managed centrally through the EC’s European Programme for
Food Aid and Food Security17 in an effort to promote efficiency and coherence with other
policy objectives, and the aid is more often provided through cash grants for local purchase
of commodities rather than in-kind shipments from Europe.

Despite some differences in their current approaches to managing development assistance,

the United States and Europe have in common a need for much improvement in how they
deliver development assistance.

ACTION STEPS
Ultimately, Africa’s economic development must come from within, through its own policy
reform, public and private investment, and sustained effort. As the dominant economic and
policy players on the international scene, however, the United States and Europe have an
obligation – and a national interest – to, above all, not be in the way or do harm to Africa’s
efforts and then to help fill the public investment gap. This means, at least, creating a fair
international trading regime, fostering developing country ownership of development rather
than dependency, and delivering on promised increases in growth-oriented development
assistance.

To meet these obligations, the U.S. and Europe must collaborate. Otherwise, there will be
no successful Doha Round; external assistance for economic growth will remain fragmented,
inefficient, and burdensome for its intended beneficiaries; and the scale of resources needed
to fulfill the commitments made at Gleneagles – and meet Africa’s needs – will remain
beyond reach. The U.S. and Europe should, therefore, pursue together an integrated effort
to help finance Africa’s growth, including the following three actions.

Commit to Public Investment in Africa’s Growth as an Outcome of the Doha Round

The current round of WTO trade negotiations runs the risk of failing altogether or being the
“development round” in name only. The poorest countries of Africa certainly have reason to
wonder w hat’s in it for them, as the political will to abolish U.S. and EU agricultural
subsidies seems weak at best and many countries in Africa lack the capacity to produce and
market competitively in global markets. The time is thus right for the U.S. and EU to agree
and jointly propose that quantitative commitments to increased public investment in Africa’s
rural economy and agriculture-led economic growth be linked to any new agriculture
agreement emanating from the Doha Round.

The starting point should be fulfillment of the G8’s Gleneagles pledges for doubling
development assistance for Africa by 2010, but these pledges should be reviewed and
revised in light of the AU/NEPAD Comprehensive African Agricultural Development
Programme (CAADP), which provided a template for public and private investment in
agriculture-led economic growth. CAADP called for investments totaling $251 billion over a
10-year period on irrigation, rural infrastructure to foster market access, and increased farm
productivity through agricultural research, technology development and dissemination, and
other means. The U.S. and Europe should engage in dialogue with African leaders to review
and update the priorities and estimates of resource needs outlined in CAADP and arrive at
agreed commitments to external financing that – together with private investment and
Africa’s own commitments to increased public funding for agriculture and rural development
– meet Africa’s needs.

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Linking these commitments in the agricultural trade agreement would give life to the
development aspirations of the Doha Round and provide developing countries greater
incentive to help achieve a trade agreement. Liberalized trade rules without the production
and trade capacity made possible by public investment will be of little or no value to most
poor Africans. With such investment, trade can drive growth and poverty reduction and
gain the political support in developing countries needed to drive pro-trade policy reform.

Forge a Transatlantic Partnership to Make Aid More Effective

The first proposed action would help ensure that an adequate volume of external resources
is available to support agriculture-led economic growth. More resources will be of little
value, however, unless they are deployed efficiently and effectively, following the principles
of the Paris Declaration on Aid Effectiveness. As their second action to foster African
economic growth, the U.S. and Europe should exert leadership, in active partnership, to
make aid more effective by implementing the Paris Declaration.

This will be a political challenge for many donors, primarily because it requires a real
commitment to African ownership of the development process; and this means changing a
status quo in which, for domestic political reasons, donor countries have strong incentives
to direct how their money is spent. The political forces are particularly strong in the United
States, where Congress has by law tied U.S. assistance to the procurement of U.S. goods
and services; required that food aid take the form of commodities procured in the United
States and be shipped overseas in U.S. vessels; and, from Capitol Hill, directed how a large
portion of available development resources must be spent in Africa. These restrictions
confer substantial economic benefits on U.S. citizens and political benefits on members of
Congress, and they are argued to be the price paid to maintain even current levels of
development assistance. They are, however, diametrically opposed to developing country
ownership and make U.S. economic development assistance inefficient and often
counterproductive.

Overcoming the political status quo in the United States in the ways needed to implement
the Paris Declaration is a test of whether the President and other political leaders are
serious when they declare economic development a central element of America’s national
security strategy.18 If development is that important, it should be less controlled by
domestic politics and economic special interests and more controlled by judgments about
what works, as informed by the Paris Declaration. Significantly, President Bush has pointed
in the right direction with the creation of the Millennium Challenge Account, which operates
far more in alignment with the ownership and other principles of the Paris Declaration than
USAID is able to do under its congressional mandates.

Thus, the best bilateral action steps the President and Congress can take to implement the
Paris Declaration and improve the effectiveness of U.S. economic development assistance
are to fund the MCA at least at the $5 billion dollar annual level originally promised and
make MCA’s conceptual framework the central and controlling framework for delivery of all
U.S. economic development assistance for Africa and elsewhere.19 This would insulate
funding decisions from congressional earmarks and foster the flow of U.S. resources to
countries that have taken responsibility for their own development process and
demonstrated a commitment to improving the welfare of their own people.

In Europe, an important vehicle for implementing the Paris Declaration is the European
Union Development Policy proposed by the European Commission for adoption by the
European Parliament and Council. Labeled “The European Consensus,” this joint declaration
would affirm Europe’s commitment to the common vision of development outlined in this
paper and to specific actions aimed at increasing EU funding for development and fully

9
implementing the Paris Declaration. The Parliament and Council should join the Commission
in the formal adoption of the declaration.

Of critical relevance here, The European Consensus places “particular emphasis on

cooperation with other bilateral development partners and multilateral players.” Because
the United States and Europe provide the overwhelming majority of bilateral development
assistance and play nearly dominant roles in the governance of the World Bank and other
multilateral development agencies, their active cooperation is indispensable to aid
effectiveness.

The United States and Europe should thus forge an active partnership to implement the
Paris Declaration and thereby substantially improve external investment in Africa’s growth.
The partnership should build on the MCA framework, the European Consensus, and the
Gleneagles commitments, and include as joint action steps (1) making enhanced investment
in agriculture an outcome of the Doha Round, (2) leading by example at the operational
level, within developing countries, to align their aid with developing country strategies and
harmonize activities among themselves, and (3) at the policy level, working to ensure that
the culture and programs of the World Bank and other international development agencies
fully internalize and act on the ownership principle and other elements of the Paris
Declaration.

Another form the U.S.-European partnership should take would be to support creation of
new financing mechanisms for pooling development resources and making them available to
developing country leaders under circumstances that ensure local ownership and
accountability for results. This leads to the third proposed action.

Create a Rural Infrastructure and Trade Facility for Africa

Africa needs an Africa-owned and managed financial facility to fund the large-scale, long-
term infrastructure investments needed to make agriculture-led economic growth happen.
The U.S. and Europe should join in a collaborative effort with African leaders to create and
fund such a facility as the primary vehicle in Africa for prioritizing, coordinating, and
managing external public investment in rural infrastructure and trade capacity. This action
would help give tangible form to the ones outlined above aimed at boosting resource levels
and aid effectiveness.

The African Union and NEPAD have designated the African Development Bank (ADB) as the
lead agency for financing rural development in Africa, which makes the ADB the right
institutional home for a new Rural Infrastructure and Trade Facility. In this role, the ADB
should work closely with the World Bank and other international institutions, especially as
its builds its internal capacity and gains the trust of the international community as the
steward of greatly enhanced capital for infrastructure development. In the end, however,
leadership and accountability for results should rest where they belong, in African hands.

Funding should be at a level – such as $10 billion annually – that clearly establishes the
Facility’s leadership role in funding rural infrastructure in Africa and makes a substantial
contribution to meeting the overall financing need. Other bilateral and multilateral financing
of infrastructure and trade capacity would remain important, but the Facility should, on
behalf of African leaders, help set and enforce priorities for external investment in African
infrastructure, especially regarding projects of regional importance.

As proposed here, the Facility would remain sharply focused on investment in the capital-
intensive physical and market infrastructure that is needed to support agriculture-led rural
development and economic growth, but which is unlikely to be financed adequately in the

10
near term through private channels. This might include irrigation, technology research and
development, rural roads and railways, electrification, local commodity storage and
processing, physical market facilities, financial credit mechanisms, market information
systems, farmer’s associations, and conformity assessment for SPS standards. In planning
such investments, the Facility should work closely with the private sector to ensure that
public investment is going in directions most likely to foster private investment.

In addition to providing much needed capital for infrastructure investment, the Facility
would go a long way toward transforming economic development assistance in keeping with
the Paris Declaration. It would fully embody the ownership principle, align external
resources with African priorities, and make aid delivery more efficient through the pooling of
resources. It would be entirely appropriate for the U.S. and Europe, as funders of the
Facility, to expect it to operate on principles, such as those underlying the MCA, that help
ensure investments are made where they will do good for poor people. But, in the end,
accountability for the success or failure of the effort would rest with African leaders.20

CONCLUSION
The common vision of Africa’s development, pledges by the G8 and others of increased aid,
and wide endorsement of the aid effectiveness principles of the Paris Declaration comprise
the glass-half-full side of the development picture; and these are valuable, hard-earned
achievements. The glass-half-empty side of the picture is all about implementation –
delivering on pledges of increased aid and closing the gap between principle and
performance on aid effectiveness – and this is the hard part. It involves establishing and
sustaining a budget priority on investment in pro-poor economic growth and overcoming the
political and cultural obstacles to real reform of assistance programs. And both of these
require high-level political leadership.

In the United States and Europe, senior political and policy leaders need to elevate the issue
of how economic development assistance is provided so that it is understood as a central
issue of foreign affairs and national security policy, not as another opportunity to benefit
domestic interest groups and constituencies. The ball is rolling, as evidenced by
Gleneagles, the MCA, the European Consensus and other important signs of progress. With
a sustained, high-level, collective effort, the ball can be carried to the goal line.

11
 APPENDIX

African Rural Infrastructure and Trade Facility

Concept Outline

Background
The New Partnership for Africa’s Development (NEPAD) and many African governments base
their poverty-reduction efforts on agriculture-led economic growth, which means linking
productive farmers and agribusinesses to local, regional, and global markets. While trade
liberalization at all levels is important for such growth, poverty reduction goals will not be
achieved without a large infusion of capital for rural infrastructure and the other “public
goods” that support any successful market- and trade-oriented economy.

A common theme of the Monterrey Consensus, the Millennium Development Project, and
the Blair Commission for Africa is the need for international help to provide this capital, as a
complement to stepped-up investment by African governments themselves in rural
development and poverty-reduction. This outline describes the major features of a new
facility for international financing of rural infrastructure and trade capacity that would meet
this need. It is offered to help identify and stimulate discussion of key issues.

Summary
• What – The African Rural Infrastructure and Trade Facility, a new vehicle to provide
grant funding for infrastructure and other investments that support long-term rural
development and trade capacity in Africa.

• Where – Housed at the African Development Bank (ADB) to dramatically expand the
ADB’s capacity as the designated lead agency in the African Union/NEPAD framework for
financing infrastructure development.

• How Much – Funded by periodic contributions from donor countries, with the goal of
providing by 2010 $10 billion annually in additional capital for infrastructure investment.

• Focus – Investment in capital-intensive physical and market infrastructure that is

needed to support agriculture-led rural development and economic growth, but which is
unlikely to be financed adequately in the near term through private channels; needs
include irrigation, technology research and development, rural roads and railways,
electrification, local commodity storage and processing, physical market facilities,
financial credit mechanisms, market information systems, farmer’s associations, and
conformity assessment for SPS standards.

• Overall Role – To be the primary vehicle in Africa for prioritizing, coordinating, and
managing external public investment in rural infrastructure and trade capacity.

12
Relationship to Other Development Assistance Activities
• Though intended to play a lead coordinating and financing role, the Facility will be
successful only by working closely with and leveraging the expertise and resources of
the World Bank, other existing development institutions, finance and development-
oriented ministries in African countries, and the private sector.

• The Facility will thus augment current and future infrastructure and trade development
investment efforts of the World Bank, other donors, and African countries, not displace
them.

• To maintain its focus on infrastructure and other capital-intensive public goods, the
Facility will not fund policy reform, human capacity building, trade facilitation-related
technical assistance, or assistance to specific enterprises or business development
projects, leaving their financing to other elements of the ADB and other donors, national
governments, and the private sector.

• Because the justification for public investment in infrastructure and other market-
building public goods is to attract and facilitate private investment and entrepreneurship,
the private sector will be a key partner of the Facility in defining needs and priorities and
implementing infrastructure projects.

Other Operating Principles

• The Facility is intended as a source of capital to fund Africa-led poverty reduction
strategies and investment plans, including the Comprehensive Africa Agriculture
Development Program (CAADP) and national poverty reduction strategies.

• Project proposals will be initiated by African governments, country partnerships

(including regional trade agreement secretariats), and NEPAD.

• Funding will be provided for countries whose poverty reduction strategies, investment
plans, and governance systems create a framework within which infrastructure
investment has a strong likelihood of being used effectively to foster broad-based
economic growth.

• The Facility will operate within the ADB under a streamlined management system
capable of rapid but careful and professional review of proposals to ensure economic,
governance, social, and environmental criteria are met.

• Funding of infrastructure projects will be untied but local procurement and employment
opportunities will be a positive factor in the review and approval of projects.

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 NOTES

1
For example, UN/FAO, Rome Declaration on World Food Security and World Food Summit Plan of Action (1996)
(http://www.fao.org/documents/show_cdr.asp?url_file=/docrep/003/w3613e/w3613e00.htm); UN, We the Peoples –
The Role of the United Nations in the 21st Century (Millennium Report of the Secretary-General of the United
Nations, 2000) ( http://www.un.org/millennium/sg/report/full.htm); UN, Report of the International Conference on
Financing for Development (2002) (http://www.un.org/esa/ffd/aconf198-11.pdf); OECD High Level Forum, Paris
Declaration on Aid Effectiveness (2005) (http://www.aidharmonization.org/ah-wh/secondary-
pages/Paris2005#declaration); G8, The Gleneagles Communique (2005) (http://www.g8.gov.uk); UN, 2005 World
Summit Outcome Document (2005) (http://www.un.org/summit2005/).

2
World Bank Group, Reaching the Rural Poor: A Renewed Strategy for Rural Development (World Bank, 2003);
African Development Bank/African Development Fund, Bank Group Policy on Poverty Reduction (2004)
(http://www.afdb.org/); USAID Agriculture Strategy – Linking Producers to Markets (2004)
(http://www/usaid.gov/our_work/agriculture/ag_strategy_9_04_508.pdf); Commission of the European
Communities, Proposal for a Joint Declaration by the Council, the European Parliament, and the Commission on
the European Development Policy (“The European Consensus”) (Brussels, 13.7.2005, COM (2005) 311 final)
(http://europa.eu.int/comm/development/body/development_policy_statement/index_en.htm); Commission for
Africa, Our Common Interest – Report of the Commission for Africa (http://www.commissionforafrica.org/).

3
See, for example, the poverty reduction strategies of Ghana, Mali, Mozambique and Uganda as digested in Taylor
and Howard, Investing in Africa’s Future – U.S. Agricultural Development Assistance for Sub-Saharan Africa
(Partnership to Cut Hunger and Poverty in Africa, 2005) (hereafter “Partnership Agricultural Assistance Report”)
(http://www.africanhunger.org/index.php?location=view,article&id=232). See also African Union/NEPAD,
Comprehensive Africa Agricultural Development Programme (2003) (hereafter “CAADP”)
(http://www.nepad.org/2005/files/documents/caadp.pdf).

4
Amartya Sen, Development As Freedom (Alfred A. Knopf, Inc., New York, 1999).

5
Id. at 3.

6
Sen at 11.

7
CAADP at 9 (see note 3, above).

8
Paragraph 20, Gleneagles Communique (see note 1, above).

9
OECD High Level Forum, Paris Declaration on Aid Effectiveness (2005) (http://www.aidharmonization.org/ah-
wh/secondary-pages/Paris2005#declaration).

10
World Bank, Assessing Aid – What Works, What Doesn’t, and Why (Oxford University Press (1998); United
Nations, Report of the International Conference on Financing for Development (“The Monterrey Consensus”)
(2002) (http://www.un.org/esa/ffd/aconf198-11.pdf); OECD, Rome Declaration on Harmonization (2003)
(http://www.aidharmonization.org/ah-overview/secondary-pages/why-);

11
These and subsequent development assistance figures are drawn primarily from the OECD’s Creditor Reporting
System (CRS), which provides a compilation of data on bilateral development assistance from the 23 members of
OECD’s Development Assistance Committee, whose members include the U.S., the EC, and 17 European countries.
Other than the U.S., Japan, Canada, and Australia are the only non-European countries whose assistance is reported
through the CRS, and Japan is the only one of these among the top ten OECD donors. The last year for which
complete CRS data are available is 2003.

14
12
According to the CRS databases for 2002 and 2003, DAC members other than the United States delivered $300
million of their agriculture-related assistance for Africa’s LDCs as “program assistance” compared to $5 million by
the United States.

13
USAID’s approach to managing agricultural development assistance for Africa is described and analyzed in the
Partnership Agricultural Assistance Report (see note 3, above).

14
The discrepancy in these figures reflects the fact that there is no standard methodology for determining levels of
“agriculture-related development assistance” and that the approach taken by the United States in its reporting to the
CRS evolves from year to year. A detailed account of the basis for the author’s estimates of U.S. funding levels is in
the Partnership Agriculture Assistance Report (see note 3, above).

15
Much of what OECD has learned is presented in OECD/DAC, Harmonisation, Alignment, Results: Report on
Progress, Challenges and Opportunities (2005), a report prepared in preparation for the March 2005 meeting at
which the Paris Declaration was adopted. http://www.aidharmonization.org/dg-contribute/item-
detail?item_id=412393&version_id=252896&return_url=%2fnode%2f547720%2fbrowser%2f%3f. Another
important source of information and analysis on progress toward aid effectiveness is a survey conducted by the
OECD-DAC Task Team on Harmonisation and Alignment. See OECD/DAC, Survey on Harmonisation and
Alignment – Measuring Aid Harmonisation and Alignment in 14 Partner Countries (2004) (“DAC survey”)
(http://www.oecd.org/document/61/0,2340,en_2649_15577209_31659517_1_1_1_1,00.html); and see World Bank
Group/Operations Evaluation Department, The Poverty Reduction Strategy Initiative: An Independent Evaluation of
the World Bank’s Support Through 2003 (2004) at 46 (http://www.aidharmonization.org/dg-contribute/item-
detail?item_id=412393&version_id=252896&return_url=%2fnode%2f547720%2fbrowser%2f%3f).

16
As reported by OECD in DAC, 2004 Development Co-Operation Report, Table 23, DAC Journal, Vol. 6, No. 1
(2005). The percentages do not include technical co-operation and administrative costs.

17
See the Programme website at http://europa.eu.int/comm/europeaid/projects/foodsec/index_en.htm.

18
White House, The National Security Strategy of the United States of America (September 2002).

19
It is recognized that through the inaptly named Economic Support Fund (ESF) the U.S. provides large volumes of
assistance to Israel, Egypt, and other countries largely for political reasons. There may be legitimate national
security reasons to continue some of this assistance, but it should not be confused with assistance whose primary
motivation is pro-poor economic growth, and, when provided to poor countries, ESF funds should be managed in
ways that are minimally disruptive of local ownership and democratic accountability.

20
This proposal for an African Rural Infrastructure and Trade Facility builds on ideas concerning a special
international financing facility for Africa advanced by Prime Minister Tony Blair’s Commission for Africa, cited in
note 2, above. The proposal outlined in this paper emphasizes African leadership, responsibility, and accountability.
For further details, see the Appendix.

15